Sept. 21 (Bloomberg) -- The U.S. Environmental Protection
Agency’s proposed limits on power-plant emissions blamed for
climate change is a broad new battleground for an agency that
has spent four decades focused on the local impact of pollutants
such as lead, mercury and ozone.

The draft regulations, issued yesterday, would impose the
first cap on carbon emissions from new power plants, dealing a
blow to the market for coal. While restrictions on emissions of
sulfur dioxide and other pollutants have been in place for
years, these are a first for gases blamed for global warming.

“It’s a new day,” said Vicki Arroyo, director of the
climate program at Georgetown University. Carbon dioxide is
unique because “it’s a ubiquitous pollutant, we all contribute
to it in our daily lives, and it’s contributing to a global
problem,” she said.

While analysts said the immediate impact of the rule will
be limited, it sets the stage for the more far-reaching set of
rules governing emissions from existing power plants, which
account for 40 percent of U.S. greenhouse-gas emissions. Those
rules, which the EPA said will not be as stringent, are due by
June 2014.

“That’s the 10-billion-dollar question,” Brendan Collins,
a lawyer at Ballard Spahr LLP, said in an interview. “People
are trying to set the table for the arguments that will be made
in” the debate over rules for existing plants, he said.

Coal producers, some utilities and Republicans in Congress
all said that the standard announced today would effectively
outlaw construction of new coal-fired power plants, raise prices
for electricity and cost jobs. On Capitol Hill, House Energy and
Commerce Committee Chairman Fred Upton, a Michigan Republican,
said his panel will hold a hearing on the proposal.

New Limits

Because of low natural-gas prices and the boom in
installations of wind and solar power, no new coal plants will
be built with or without this rule over the next eight years,
according to the EPA. As a result, the agency forecasts that
this plan will result in “negligible” costs, benefits, changes
in carbon-dioxide emissions and overall economic impacts over
that period.

“These carbon pollution standards are flexible and
achievable,” EPA Administrator Gina McCarthy said in remarks at
the National Press Club in Washington. “They pave a path
forward for the next generation of power plants.”

Still, the announcement elicited a strong response from
supporters and opponents because the rule locks in place
standards that will persist if the market changes.

Environmentalists’ Goal

“The consequences will be more job losses and a weaker
economy,” Upton, the Michigan lawmaker, said in an e-mail.
“These stringent standards will actually discourage investment
and the development of innovative new technologies.”

Senate Minority Leader Mitch McConnell, a Kentucky
Republican, said in an e-mail, “The president is leading a war
on coal and what that really means for Kentucky families is a
war on jobs.”

Carbon-dioxide emissions since the Industrial Revolution
have led to a warming of the Earth’s temperature in the past 50
years, worsening forest fires, drought and coastal flooding,
according to the U.S. Global Change Research Program.

The EPA proposed a limit of 1,100 pounds of carbon dioxide
per megawatt hour for new coal-fired plants, which would require
them to capture and store a portion of the carbon dioxide they
produce. Traditional coal plants issue 1,800 pounds, according
to the EPA. Large natural-gas plants would have a lower
standard, 1,000 pounds, which they can meet without a capture
technology.

Comment Period

McCarthy said the law gives the agency a year to finalize
the rule and she vowed to consider all the comments the agency
will receive on the proposal. Any new plants built during that
period would still need to comply with the standard.

Stock prices of coal producers fell on the news.

The stock of Peabody Energy Corp., the biggest U.S.
producer, fell from more than $70 a share in April 2011 to less
than $19 a share. It fell 58 cents yesterday, to $18.16. Arch
Coal Inc.’s stock fell from $35 a share in April 2011 to less
than $5. It closed down 25 cents yesterday at $4.74.

Not Available

“We believe that coal plants with near-zero greenhouse gas
emissions will be achievable in time, but such technology is
simply not available today,” Deck Slone, Arch’s director of
public policy, said in a statement.

In recent weeks two federal coal auctions in Wyoming were
failures: One attracted no bidders and the second resulted in
such a low bid that the Bureau of Land Management rejected it.

While the rule is unlikely to have an immediate impact on
utilities, “we believe that the EPA’s cumulative regulations
are making it harder to build coal generation, and this will
affect power supply diversification,” Standard & Poor’s credit
analyst Jeffrey Panger said in a research note.

Utilities in the U.S. are shuttering old coal plants, and
switching to gas for base load power production.

“We’re witnessing the death of the coal era and the birth
of the natural gas era in America,” Chris Faulkner, chief
executive of the Dallas-based Breitling Oil and Gas Corp., which
uses carbon dioxide in oil production, said in an e-mail. “I
think Obama’s new carbon limits make a statement that natural
gas is in fact the bridge fuel for America’s future.”

Mixed Results

The rules were also embraced by some utilities, such as the
Public Service Enterprise Group Inc., and by environmental
groups who have been urging Obama to tackle climate change, with
mixed results.

“Big polluters have been getting a free ride for decades,
while Americans foot the bill in the form of asthma attacks,
respiratory illness, floods, wildfires, and superstorms,” said
Michael Brune, the head of the Sierra Club.

The rules issued today set a limit on carbon-dioxide
emissions from coal plants that can only be met with technology
to capture that gas, and then inject it underground for storage.
That technology, called CCS, isn’t yet being used on a
commercial scale as the first large-scale plant is under
construction by Southern Co. in Kemper County, Mississippi. The
plant, which received $270 million in subsidies from the federal
government, is facing local opposition and $1 billion in cost
overruns.

It’s also selling the carbon dioxide to nearby oil
drillers, who will use it to spur production in old fields. That
creates a ready revenue source that doesn’t exist nationwide,
and the company itself argues it’s a mistake to base a
nationwide standard on this project.

Kemper “should not serve as a primary basis for new
emissions standards impacting all new coal-fired power plants,”
Tim Leljedal, a spokesman for Southern, said in an e-mail.